A. The strategy process

Question 1

what is an ecosystem?

Answer 1

made up of a network of organisations-including customers, suppliers, distributors, competitors, government agencies- involved in the delivery of a product or service

can be via either co operation or competition

constantly evolving and within which each organisation must be flexible and adaptable to survive

Question 2

what is CIMA’s definition of strategy?

Answer 2

a course of action, including the specification of resources required, to achieve a specific objective

Question 3

what is the J,S and W definition of strategy?

Answer 3

strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its configuration of resrouces within a changing environment, to meet the needs of markets and to fulfil staeholder expectations

Question 4

what are the characteristics of strategic decisions?

Answer 4

• likely to be affected by the scope of an organisation’s activities as they conceive the organisation’s boundaries
• involves the matching of the activities of an organisation to its ecosystem
• must also match the activities of an organisation to its resource capability
• needs to be considered in terms of the extent to which resources can be obtained, allocated and controlled to develop a strategy to the future
• operational decisions will be affected by strategic decisions because they will set off waves of lesser decisions
• will be affected by the expectations and values of those who have power within and around the organisation
• affect the long-term direction of the organisation
• strategic decisions are

Question 5

what are the advantages of deliberate long-term planning?

Answer 5

• forces managers to look ahead:identify changes and how to deal with them
• improved control:identify mission and objectives, communicate these with management and targets
• identify key risks:undertaking detailed analysis, management can identify key external and internal risks and create contingency plans to deal with these
• encourages creativity: management will have to generate ideas for the organisation, meaning that it can benefit from their experience and ability to innovate

Question 6

what are the disadvantages of formal, long-term planning?

Answer 6

• setting corporate objectives:difficult to create overall mission and objectives. could be contradictory to key stakeholders.
• short-term pressure:pressures on management are often for short-term results. can be difficult to motivate managers by setting long-term strategies when short-term problems can consume their entire working day
• difficulties in forecasting accurately
• bounded rationality:incomplete analysis, strategy based on this
• rigidity
• cost
• management distrust

Question 7

what are the levels sf strategy?

Answer 7

CORPORATE (strategic)
for whole organisation:
-acquisitions, disposals and diversification
-entering new industries
-leaving existing industries

BUSINESS (or management)
how the org can compete successfully in the individual markets:
-achieve advantage over competitors
-meet the needs of key customers
-avoid competitive disadvantage

FUNCTIONAL( or operational)
day to day management strategies of the organisation
-HR strategy
-marketing strategy
-IT and IS strategy
-operations strategy

Question 8

what are the different types of strategic planning models?

Answer 8

rational model
emergent model (Mintzberg)
Logical incrementalism (Lindbolm)
Freewheeling oppurtunism

Question 9

what is the rational model?

Answer 9

logical, step-by-step approach
-requires analysis of existing circumstances, generate possible strategies and select the best ones and then implement them

Question 10

what 3 stages did JSW group the rational model stages into?

Answer 10

STRATEGIC ANALYSIS

• internal analysis to identify strengths and weaknesses
• external analysis to identify opportunities and threats
• stakeholder analysis to identify key objectives and to assess power and interest of different groups
• gap analysis to identify the difference between desired and expected performance

STRATEGIC CHOICE

• strategies are required to ‘close the gap’
• competitive strategy - for each business unit
• directions for growth-which markets/products should be invested in
• whether expansion should be achieved by organic growth, acquisition or some form of joint arrangement

STRATEGIC IMPLEMENTATION

• formulation of detailed plans and budgets
• target setting for KPIs
• monitoring and control

Question 11

how can the JSW approach be applied to an airline?

Answer 11

strategic analysis:competitor action, oil price forecasts, passenger volume forecasts, availability of cheap landing rights

strategic choices: which routes to launch?set up a subsidiart from scratch or buy an existing low-cost airline?

strategic implementation: setup of new subsidiary. Staff recruitment and training. Acquisition of aircraft and obtaining of landing slots.

Question 12

what is an emergent strategy?

Answer 12

strategies that evolve in response to unexpected events that impact on the organisation

Question 13

what is an example of the emergent model working with Pfizer

Answer 13

Viagara was originally a medicine for high blood pressure but after seeing side effects, used for other reasons

Question 14

what is Logical Incrementalism?

Answer 14

small scale extension of past policy rather than radical change

Question 15

Why doesn’t Lindbolm believe that the rational model of decision-making is sensible and suggests that in the real world it is rarely used?

Answer 15

Strategy is not usually decided by autonomous strategic planning terms that have time to impartially sift all the information and possible options before deciding on the optimal solution

managers have to sift through options themselves, bounded rationalist means they usually choose between relatively few options

leads to strategy being small scale extensions of past policy

Question 16

what are the advantages of the incrementalism model over the rational model?

Answer 16

more acceptable to stakeholders as consultation, compromise and accomodation are built into the process

less of a cultural shift for the organisation to adopt an incremental approach to strategy as the organisation will not be trying to implement major shifts in its activities

Question 17

what are the disadvantages of the incrementalism model?

Answer 17

no overall long-term plan causing it to suffer from strategic drift, eventually leading to it being unable to meet the needs of its customers

can mean that the organisation fails to make major changes if needed

Question 18

what is freewheeling opportunism?

Answer 18

suggest that organisations should avoid formal planning and instead simply take advantage of oppurtunities as they arise

Question 19

what is the main justification against formal planning?

Answer 19

takes too long and is too constraining especially in fast paced industries such as pharma and tech development

may also suit any experienced managers who happen to dislike planning

Question 20

what are the problems of lack of formal planning?

Answer 20

failure to identify risks: don’t look ahead

strategic drift:does not have an overall plan for the future, meaning that it may be difficult for it to effectively compete in its market in the long term

difficulty in raising finance:investors like to know future plans

management skill:highly skilled at understanding and reacting to the changing market

Question 21

what are the drawbacks of formal strategic planning?

Answer 21

too rigid: stifles innovation

bounded rationality: key issues are missed

time consuming, expensive and slow: issue in fast paced industries

Question 22

what type of organisations do more formal planning approaches suit?

Answer 22

• exist relatively stable industries meaning there is sufficient time to undertake detailed strategic analysis
• have relatively inexperienced managers, as the formal planning approach helps to ensure they are familiar with the organisation as well as providing a series of guidelines they can follow to help them develop a strategy

Question 23

what type of organisations are more informal approaches suited to?

Answer 23

• dynamic, fast changing industries where there is little time to undertake formal stategic analysis
• have experienced, innovative managers who are able to quickly identify and reat to changes in the organisation and its environment
• do not need to raise significant external finance (external investors typically prefer a formal planning approach)

Question 24

why is strategic planning complex for NFPs?

Answer 24

multiple objectives are hard to prioritise

objectives are more difficult to measure - usually non-financial

influence/objectives of funding bodies

recipients of the service are not the ones who pay for it

Question 25

what is the three Es approach that NFPs usually focus on?

Answer 25

Economy = inputs Efficiency= inputs to output process Effectiveness=solely outputs and achieving goals

Question 26

what is the traditional approach to strategic planning?

Answer 26

look at stakeholders and their objectives formulate plans to achieve these objectives not useful for NFPs

Question 27

what is a 'market-led' or 'positioning' approach?

Answer 27

starts with analysis of markets and competitors' actions before objectives are set and strategies developed ensure firm has a good 'fit' with its environment, needs to adapt too so predict changes main issue:hard to predict future, especially for volatile markets

Question 28

what is a 'resource-based' or 'competence-led' approach?

Answer 28

many firms who have found anticipating the environment to be difficult have switched to a competence or resource-based approach, where the emphasis of strategy is to look at what the firm is food at - its core competencies ideally these correlate to the areas that the firm has to be good at in order to success in its chosen markets and also difficult for competitors to copy

Question 29

what is strategic management accounting?

Answer 29

form of management accounting in which emphasis is placed on information which related to factors external to the entity, as well as non-financial information and internally generated information indicated key difference between strategic and traditional management accountants

Question 30

what is the role of traditional management accountants?

Answer 30

tend to focus on internal company issues their role is to: - aid in the creation of operational strategies for the business - safeguard company assets- both tangible and intangible - measure and report both financial and non-financial performance to managers - ensure efficient use of assets and resources

Question 31

what is the role of stratefic management accountants?

Answer 31

provide information to help managers make key strategic decisions requires external focus forward-looking approach

Question 32

what is the information that is provided by strategic management accountants?

Answer 32

competitor analysis customer profitability pricing decision portfolio analysis corporate decision support customer profitability analysis evaluation of brand value strategic information for acquisitions investment in strategic management systems

Question 33

what are some examples of comparative information produced by traditional vs strategic management accountants?

Answer 33

cost structure vs competitor cost structure product costs vs competitor product costs market share vs relative market share profitability vs relative profitability price margins vs competitor price margins

Question 34

how will information by strategic management accountants help the business?

Answer 34

- more effective strategic planning - increased awareness of the business and its environment - increased control over business performance - better decision-making

Question 35

what is a mission according to CIMA?

Answer 35

a fundamental objective of an entity expressed in general terms i.e. basic purpose of the organisation

Question 36

what is the definition of a mission according to Peter Drucker?

Answer 36

the mission says why you do what you do, not the means by which you do it

Question 37

what is a mission statement?

Answer 37

published statement, apparently of the entity's fundamental objectives. This may or may not summarise the true mission of the entity (CIMA) statement in writing that outlines the organisation's mission and summarises the reasoning and values that underpin the operations

Question 38

what are the characteristics of a mission statement?

Answer 38

- a brief statement of no more than a page in length - very general statement of entity culture - states the aims (or purposes) of the organisation - states the business areas in which the organisation intends to operate - open-ended - does not include commercial terms such as profit - not time-assigned - forms a basis of communication to the people inside the organisation and to people outside the organisation - used to formulate goal statements, objectives and short-term targets - guides the direction of the entity's strategy and as such is part of the management information

Question 39

what purposes do mission statements fulfil?

Answer 39

to communicate with all the stakeholder groups to help develop a desired corporate culture to assist in strategic planning

Question 40

what are the drawbacks of missions statements?

Answer 40

they may not represent the actual values of the organisation they are often vague they are often ignored they may become quickly outdated

Question 41

who normally drafts mission statements?

Answer 41

directors or managers in the organisation who are uniquely positioned to understand the needs and aims of the business at a high level -should identify the needs and aims of these stakeholders

Question 42

whats is the lifespan of a mission statement?

Answer 42

no set rules on how long a mission statement will be appropriate for an organisation reviewed periodically to ensure it still reflects the company's environment

Question 43

How did Yahoo develop its mission statement?

Answer 43

early 2000s: vague statement 2007: competition from Google, made mission statement more specific to show difference between 2 companies 2021: developed further to target markets and the need to connect them

Question 44

what is a vision statement?

Answer 44

outlines the ideal position that the organisation wishes to reach within the medium to long-term LONG-TERM ASPIRATIONS similar drawbacks to mission statement

Question 45

what are values?

Answer 45

core ethics or principles which the org will abide by help drive the behaviour of the business, and guide the actions of management, employees and other stakeholders such as suppliers

Question 46

what purpose do clearly stated and adhered to values serve to the organisation?

Answer 46

to guide staff behaviour to demonstrate integrity and accountability to external stakeholders set the organisation apart from its competitors reduce the risk of inappropriate behaviour from staff set the culture of the organisation

Question 47

what are objectives?

Answer 47

more specific than a mission and seek to translate the mission into a series of mileposts for the organisation to follow

Question 48

what is the SMART criteria for objectives?

Answer 48

Specific- clear statement, easy to understand Measurable-to enable control and communication down the organisation Attainable- it is pointless setting unachievable objectives Relevant-appropriate to the missions and stakeholders Timed-have a time period for achievement

Question 49

what are the key issues with objectives?

Answer 49

- objectives drive action, so it is important that goal congruence is achieved and the agreed objectives do drive the desired strategy - it can be difficult (although necessary) to prioritise multiple, often conflicting objectives - this is made more complex when some objectives are hard to quantify - will be a mixture of financial and non-financial objectives - always the danger of short-termism - objectives will vary across stakeholder groups and a strategy may satisfy some groups but not others

Question 50

what is a primary pbjective?

Answer 50

also known as corporate objectives major, overriding objectives of the organisation can be financial or non-financial but relate to the organisation as a whole and typically the needs of its stakeholders

Question 51

what are the secondary objectives?

Answer 51

directly relate to the various strategies that the organisation needs to adopt in order to meet its primary objective

Question 52

when could short term and long term objectives conflict?

Answer 52

when resources are scarce or badly planned by management - cut back on R&D so less innovation - reducing investment in brand leading to loss of customers in long term - delaying or cancelling capital investment which reduced ability to grow - reducing expenditure on staff motivation and training leading to poorer quality service

Question 53

what are the objectives of NFPs?

Answer 53

satisfy needs of their members or sections of society they are servicing

Question 54

what is the prupose of environmental analysis?

Answer 54

- identification of threats and opportunities - assessment of competition - identification of strengths and weaknesses - meeting stakeholder needs

Question 55

what are the drivers of change when it comes to an environmental analysis?

Answer 55

changing technology -e.g. AI, cloud computing unpredictable demand - due to weakness in the global economy globalisation - global companies are affected by different issues in different markets e.g. UK and Brexit development of high-growth, emerging economies - e.g. BRIC geopolitical impact - e.g. the US relationship with China changing demographics - e.g. increasing urbanisation customer empowerment - customers want more choice digital tech-business models, opportunities automation- in all sectors, not just manufacturing sustainability - increased awareness and demands from customers